Healthy Living: Financial Risks or Financial Rewards?

Age 65: that was an American’s life expectancy when Social Security was in its infancy. Today, a 65 year-old female has a 50% chance of living to age 85. More astounding is the fact that a couple, in their 60’s, creates a 25% likelihood that one spouse will live to age 97. So, what’s your plan for generating 40 years of income after you retire? 

$ 220,000 in Healthcare Costs, Alone  According to a 2013 estimate by Fidelity Investments®, a 65 year-old couple needs that amount of money to cover health care costs in retirement. The estimate does not include nursing home care, and assumes traditional Medicare insurance coverage. And, while the landscape for healthcare costs is ever changing, planning for those out of pocket costs needs to be factored into everyone’s future.                

Health Savings Account (H.SA); The Secret Retirement Resource  No one knows where tax rates will be in the future, but Tax-Free is an easy rate to plan for. When President Bush, introduced the H.S.A, in 2003, the focus was on a way to address healthcare costs. But unlike earlier plans, this tax-advantaged plan didn’t require annual spend downs.  Instead, contributions, and earnings, could be used in future years for qualifying expenses.                                   

Creating a Healthful Nestegg   To be eligible for an HSA, you need a high-deductible health insurance plan. With such an insurance plan, you exchange lower current premiums for a higher current deductible. In theory, the arrangement encourages individuals to become better consumers of heathcare - watching costs and living more healthfully, to avoid those costs. By reducing the upfront cost on premiums, an individual has funds to save. And, a healthy individual may be able to save more than they spend. For 2014, a couple can contribute $6,550 to an HSA, plus more if they’re over 55. But, instead of using that money for today’s doctors bills, consider paying the bill with non-HSA dollars and save the receipt. Then, in retirement, reimburse yourself, tax-free.  All the while, those tax-free contributions grow tax-fee.  Hmmm . . . . tax-free contributions, tax-free investment earnings and tax-free withdrawals.  That's tough to beat!! But,what if your HSA balance, by retirement, exceeds your medical bills? Then withdrawals are taxed like your 401k, as ordinary income.

HSA Investments - Beyond those low-rate savings accounts   When HSAs were first introduced, contribution levels were small and banks were the only game in town. After all, who cared if you only got 0.25% on a couple thousand dollars. But as balances grew and rates continued to shrink, HSA account holders demanded more and the market responded. Today, more than two dozens HSA custodians offer mutual funds and self-directed brokeraged accounts. If you're beginning to accumulate some serious dollars in your account, HSAsearch.com is a great source for comparing costs and features on many of those providers. With a bit of reseach, you can find the right mix of balances, fees and investment options.

We don't believe that preparing for all aspects of retirement is something you can do with a quick and (seemingly) easy online calculator -- there are just too many moving parts to consider. So, grab a glass of your favorite beverage and roll up those sleeves. Or, give us a call. When it comes to retirement planning, we keep our sleeves rolled up all the time.